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Consider the following problem with asymmetric information in the credit market. Suppose the lending interest rate(r1) is2%, and the borrowing interest rate(r2) is6.1%. What fraction
Consider the following problem with asymmetric information in the credit market. Suppose the lending interest rate(r1) is2%, and the borrowing interest rate(r2) is6.1%. What fraction of borrowers will default on theirloans?
A.
3.9%
B.
96.1%
C.
5.9%
D.
94.1%
E.
None of the above
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